Chinese Business Tradition

Portrait of the founding emperor of Shang (1700BC-1100 BC), by Ma Lin, an artist of the Song Dynasty (960–1279)

For thousands of years, China had been a peasant society with commercial activities consciously suppressed, which shaped China’s business traditions. But it was not always the case. There was a time when China was a paradise for merchants, and the merchant paradise lasted for 600 years.

It was Shang, a dynasty established in 1700BC by Chinese merchants.

The Achievements of the Merchant Dynasty: An Era of Reform & Opening up

Shang was an open-minded and creative age.

During that time the advanced bronze technology was developed; a monetary system was established using shells, both collected from the seashore and made with animal bones or metals; large cities were built to facilitate trades, and a legal system governing the civil and business activities was set up.

And above all, the earliest form of Chinese script known as Jiaguwen was invented, from then on the events in Chinese history was faithfully and meticulously documented.

The Foundation of the Merchant Achievements: Hydraulic Projects and Advanced Agriculture

Han Dynasty brick carving: Yu the Great, Portrait of Yu the Great, the greatest hydraulic engineer in Chinese history and the founding father of Xia (2000BC-1700BC), carved on brick by an artist of Han Dynasty (206 BC-220AD)

The ancestor of Shang’s ruling family was not a merchant but a government official who assisted Yu the Great, the founding father of the preceding Xia Dynasty (2000BC-1700BC), to build a massive flood control and irrigation system.

The innovative hydraulic infrastructure, along with the Lunar Calendar formulated also during the Xia for the purpose of helping guide the farming activities, played the critical roles in China’s speedy agricultural development.

As some populations had been freed from working in the land, they were able to conduct more profitable craft and commerce businesses, while the roads and waterways built to allow the hydraulic projects to proceed made the inter-regional trade possible.

All these paved the way for the rise of the merchant class in China. Over time these highly mobile group of people grew so powerful that they eventually overthrew the Xia and set up a kingdom ruled by the merchants.

The Failure of the Merchant Dynasty: Opening up to Everything that Generates Profit

As Shang people indulged in commercial activities and placed the pursuit for profit above anything else, their agriculture sector gradually weakened, so the kingdom kept waging wars against its neighbours in the east along China’s coastline where the lands were under better care thus more fertile and agricultural products abundant. The wars helped expand Shang to include today’s Jiangsu, Zhejiang and Fujian provinces, but it also depleted the state financially.

The traditional way of Chinese bookkeeping

As a merchant society, the people of Shang were basically governed by business contracts. Apart from that, they felt no obligation to help the community when needed or defend the territory when attacked. After all, they had little attachment to the land, either physically or emotionally.

Since the ethical foundation that bounds individuals together into a society crumpled, the authority had to rely heavily on the laws to keep the order, and the laws of Shang were numerous and the punishments were ruthless.

A morally corrupted litigation riddled state that was based on bubble economy and harsh punishment could gain no loyalty from its citizens; when a duke called for rebellion, the soldiers responded immediately, and the last merchant king burned himself in the palace.

A Response to the Merchant Dynasty: Refocus on Agriculture and Morality

When Zhou replaced Shang, the new government drew lessons from the merchant state. It laid down a policy to promote the real economy (agriculture) and positioned moral principles and community values above the laws and individual pursuit of profit.

Zhou era is a significant turning point in Chinese history. For over 2,000 years, it served as the archetype for later dynasties’ political, economic and culture formation.

And among all Zhou fans in Chinese history, Confucius (551BC – 479BC) was the most vocal one.

Confucius: Moral Principles and Social Values First

Portrait of Confucius by artist Wu Daozi of Tang Dynasty (618 – 907)

Confucius praised Zhou for having correctly identified the most important task of the government: “the mission of the state is not about collecting abundant wealth, but to uphold morality and justice (国家不以聚集财富为利益, 而以实行道义为利益).”

How to uphold morality and justice?

He believed it cannot be achieved through intricate laws, endless litigations and harsh punishment, because “if the people be led by laws, they will only try to avoid the punishment with no sense of shame; but if the people be led by virtue, they will discern right from wrong (道之以死, 齐之以刑, 民免而无耻; 道之以德, 齐之以礼, 有耻且格).”

He hence regarded a society that is dominated by legal professionals and lawsuits as morally less advanced. “I do not inspire to be the best judge,” he once said, “but work on teaching people not to quarrel, fight and initiate litigations (听讼, 吾犹人也. 必也使无讼乎).”

He summarised two social values as the cornerstones of a civilised society: benevolence (仁) and rites (礼).

Benevolence is about compassion towards fellow human beings, which is the foundation and core of morality. Yet benevolence is an intangible attitude, therefore it needs tangible rites – the code of civil conduct – to ensure the moral principles are observed. As for law, it is just the bottom line of acceptable civil conduct.

In the ideal world of Confucius, individuals shall wish to be successful as well as like to help others to success (己欲达而达人), while the state governs for the interest of all people not just a small group of rich and powerful elites (天下为公).

His social aspiration clearly clashes head-on with the conventional merchant spirit which is all about competing against each other and hunting for profit.

A State Policy That Lasted for 2000 Years: Suppress Merchants

A merchant encountering river pirates, illustration by a Ming Dynasty artist for a short story

Another 300 years or so past since Confucius advocated benevolence and rites, and Han Dynasty, one of the four golden ages in the imperial Chinese era, came into being (another three are Tang Dynasty, Song Dynasty and Ming Dynasty). But right from the beginning, it ran into a serious collision course with the merchants.

By then the country had just recovered from the decades of civil wars caused by peasant rebellions and urgently needed to get back to its feet economically, yet many merchants kept doing speculative purchase then held on the precious goods waiting for prices to soar.

The founding emperor of the Han Dynasty himself was originally a small merchant and knew well how an aggressive business culture could encourage even force people to adopt bad practices. His government thus introduced strict laws to regulate the market, including to allow the state monopoly on salt, iron and alcohol, exercise government control of transportation, logistics and price, and impose heavy taxes upon merchant business.

In an effort to curb a profit-chasing-at-all-costs mentality, during the reign of his grandson Emperor Hanwu, the social status of the merchants was formally demoted, and eventually, the poor retail businessmen and bankers found themselves at the bottom of China’s four major social classes below that of scholars, peasants and tradesmen. They were prohibited from taking the state exam to become a government official, wearing clothes made of fine garments such as silk, building residences in a grand style, travelling in a luxurious carriage and purchasing farmland for commercial uses.

The Response from the Merchants: Becoming a Confucius Merchant

A Chinese street vendor in the 15th century doing business with kids in the same way he did with adults (童叟无欺): one of the basic characteristics of a Confucius merchant – painting by Ming artist Lu Wenying (1421-1505)

Ever since the Confucius had been elevated to the state-sponsored ideology, also during the reign of the mighty Emperor Hanwu, the concept that every kid can be brought up as a noble adult through right education gained a popular recognition, and China transformed from a rigidly hierarchical social system into an open class structure, where every man had an opportunity to become a government official once passed the academic examinations regardless of which family he was born into. In fact, many prime ministers of the Song and Ming were from a very humble background.

However, there was an exception. For the merchants and their children the door to improving social status through academic examinations was still shut, completely.

Does that mean the merchants and their descendants would be hopelessly condemned to the state of social outcasts forever?

Here came the Ming Dynasty (1368 – 1644), a turning point for Chinese merchants.

Wang Yangming (1472 – 1529), a high government official and one of the most respected Confucius scholars, had famously said the following: “Four groups of people (scholars, peasants, tradesmen and merchants) have different occupations but the same consciousness (古者四民异业而同道，其尽心焉，一也).”

After a thousand years of struggle about their position in a Confucius China, eventually Chinese merchants found a way to join the mainstream culture: that is to resolve the conflict between Confucius teachings and merchant practices and to conduct business in an ethical manner with an aspiration to achieve the common good.

By so doing, many sellers and bankers had successfully reinvented themselves as Confucius Merchants.

After the collapse of the Ming, sizable scholars and former officials who refused to serve an alien regime of invaders decided to make a living by joining the merchant rank, which further boosted the number and uplifted the status of the Confucius merchants in Chinese society.

The Contributions of the Merchants

Despite an inherited commerce-suppress policy during China’s classic age, the contributions made by the merchants to the Chinese economy kept growing.

A 1:1 replica of the Treasured Ship of the Ming Dynasty (1368- 1644)

Song Dynasty (960-1279) was a highly progressive age in technology, which led to the rapid growth of manufacturing and craft industries and that in turn stimulated the commerce activities. During that time, the trade and commercial tax paid to the state had exceeded the tax collected from agriculture — the same phenomenon did not occur anywhere in the world until centuries later.

After a brief setback, China rose again in the Ming time, so was the commerce. Ming Dynasty had developed the most advanced commercial economy in Chinese history, with merchants travelling to China from the Middle East, Central Asia and South East Asia, and government-sponsored fleets cruising the world and conducting the trade business along the way.

A Treasured Fleet of the Ming Dynasty in the 15th century loaded with commercial goods sailing towards the Middle East and Africa

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27 comments

hi, that was just an amazing post! I had never read or known about Chinese history or culture. This really blow me away and I realized something that no matter where the human race was fighting for good, they had things in common.

I absolutely loved the saying about being in 4 different occupations, but the same consciousness. I think this applies to us the current day as well. It is never about the money, but always about the morals and equality! 🙂 That is what I take away from it.

Hey Awen,
This is an amazing blog you’ve put up, I’m actually quite blown away! So much information. I’m from Malaysia and I have to say, the Chinese are excellent merchants.

Even after they’ve blended in, their business skills are what’s influencing others to work harder and grow their businesses too. The Ming dynasty influence is very strong in Malaysia and Singapore, I love witnessing the blending of cultures as I am of mix blood myself.

Great write-up my friend, do keep it up. Wishing you an awesome New Year!

Hi Awen,
An interesting article on the Chinese business traditions. Obviously profit above everything else can’t work as the merchants found out and a more reasonable system where the state is responsible for enforcing the law and where we have compassion towards fellow humans is a much healthier and lasting environment.
It’s a shame today that there are not more businessmen like the Confucian merchants, ready to work for the good of the people or perhaps in China they still exist?

Precisely Peter, today the spirit of reckless greedy rules everything in the name of free market and competition promoted by some big businesses, especially some multinationals that grow like the wild beast out of the control of the civil world.

Very good read abundant with information. You are most certainly well-versed on Chinese history.

Sometimes it’s pretty upsetting seeing priorities being skewed for the sake of business, which as you have stated had taken its toll in the past. What’s worse: we fail to learn from history, even today.

Always interesting to read about other cultures, especially paired with how history has led them to the point they are at now. Very cool read, thanks for sharing.

Hello, thanks for providing such a rich information. For me as the one from the Western side, China is a fascinating subject. One thing, that our cultures are so different and not so many connections were made hundred years ago. Just now, thanks to Internet and connecting flights, we can be a lot closer. Chinese culture is so rich, there are so many things that are not easy to grasp during few hours. I never visited China, but I would like to in future. You have a lot of knowledge about China such as Confucius and panda. They are funny, but this cute animal is a great example on how to connect people through feelings and emotions. Your article is great because you covered Chinese history in an understandable way. It is an educating piece, a good one.

Hello Nemira, thanks so much for your ultra kind message. Yes, the Western culture and the Chinese culture is so different. The former is outgoing, straightforward and bright like the sun, and the latter is subtle, demure and reflective like the moon – they can accomplish each other perfectly if they work together.

Because China has been lagged behind the West for centuries, it tries to catch up and learn everything about the West. But the West’s understanding of China is still extremely lacking. If this website can help reduce the gap between the two, that would make all my work worthwhile.

Trying to be number 1, and always be number 1, that is very demanding. But I believe not all Chinese like that or are like that 🙂 Often their urge to be number one is driven by external pressures, such as a student from her parents’ expectation, an office worker from his promotional requirement. But when they get used to such pressure and urge, it becomes a habit, which has equipped them to move forward in a competitive business world.

Still, there are many Chinese who are rather lied back and even prefer to live as hermits.

Your input about Singapore Chinese is very interesting. I don’t have much knowledge about Singapore and thanks for your information

It’s like you can read my thoughts! You have addressed lots of my concerns. I’m not a businessman, I just don’t like the business culture we see in the West today. Money rules everything from politics to education.

Will you expand this topic into an e-book? That will be a nice book to read.

This article is quite helpful for understanding Chinese business culture. I once read an article, I can’t remember from a newspaper or book, saying in Southeast Asian Chinese community, it is usually women not men heading the family business, because working on business isn’t a glorious occupation for men to take. Now I know why. Thank you for taking your time to compose this.

Yes you are right diigo, the men would much prefer to take a position at government office or academic field as an official or scholar – only those jobs were traditionally viewed as prestigious in Chinese society.

This is a very important topic deserving a good discussion: how modern society should keep a balance between financial success and ethics. Thank you for such a comprehensive review of that piece of history and lessons.